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Redistribution of funds in NSEL scam hits a roadblock?

Thursday, December 06, 2018

By Tariq Khan

The redistribution of funds in the NSEL scam has hit a roadblock after the small investors have complained to the police that the big sharks are jeoparding the entire system of distribution. According to the laws laid down by the government it is the small investors who should be getting their dues cleared first and later the big investors.

But contrary to the decisions, the big investors have now allegedly hijacked the process with the Chartered Accountant (CA) clearing the sanctions first to the market biggies. Investors were set to get back some of their dues for the first time in Rs 5,600 crore NSEL scam, according to sources.

The authorities appointed by the government had asked brokers to give an undertaking to start distribution process. Around Rs 35 crore have been marked to the competent authority’s account to be first distributed equitably among investors and Rs 60 crore is headed for the escrow account to be disbursed only after high court nod. Regulator Securities and Exchange Board of India had given final hearing to top brokers in the NSEL probe soon.

The process of distribution has raised many controversies as the CA cleared the sanction for big brokers like Motiwal Oswal, Phillips, Infoline Media and all. The NSEL Investors Action Group (NIAG) a month back had shot letters of complains to the Maharashtra Chief Minister Devendra Fadnavis and Economic Offence Wing (EOW) of Mumbai police requesting for justice. The letter, the copy of which is with The ADC, stated that “We have learnt from reliable sources that the state of Maharashtra is likely to distribute money to the investors whose outstanding amount is more than 2 lakhs and less than 10 lakhs. This, however, will be unfair and cause injustice to the other investors. Also, it is illegal as per MPID Act under Section 7 (4) of the MPID Act which clearly states that equable distribution among the depositors of the money realised from out of the property attached.

Also, there is no way to find out who is small by merely by going by the quantum of investment. In NSEL case there are lot of families who have invested almost their entire wealth/life savings and most of them are in the bracket of Rs 20 lakhs to Rs. 1 crore. It would be gross injustice if the person having large net worth, but small investment is denied of the money. Also, the process of distribution has raised so much ambiguity as according to the replies filed by competent authorities the CA is not aware of the number of investors.”

The letter further stated, “EOW has also sought for the data and only 6,500 investors have responded. The said information is also not authentic and needs to be confirmed by the forensic auditor. The list of investors do not have bank account of the investors. The prayer sought was equal distribution to be made to the investors through the trading clients. Nowhere in the prayer the CA has stated that the amount has to be paid to small traders first.

From the above number of 12,711 appears erroneous as NSEL has already settled 608 traders who had outstanding of less than two lakhs from the total traders of 12,735 thereby leaving the trader count as 12,127. This itself raises the doubts on the working done by the forensic auditor and the CA on the actual number of the claimants having claims.”

When contacted CA Krishnamurthy refused to divulge details and stated that “All procedures are being followed as per the rules. The matter is in court.”

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